DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI

Transcription

1 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI FINANCIAL STATEMENTS AND SUPPORTING DATA REQUIRED BY HUD FOR THE YEAR ENDED JUNE 30, 2017 AND INDEPENDENT AUDITORS REPORT

2 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI Table of Contents Page Independent Auditors Report 2 3 Financial Statements: Statement of Financial Position 4 5 Statement of Activities 6 7 Statement of Cash Flows 8 9 Notes to Financial Statements Supplemental Information: Supporting Data Required by HUD Financial Data Schedules Submitted to HUD Report Required by Government Auditing Standards Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Reports Required by the Uniform Guidance: Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 30 Certificate of Officers 31 Independent Accountants Report on Applying Agreed-Upon Procedures

3 INDEPENDENT AUDITORS REPORT To the Board of Directors Dela Vina Housing, Inc. Monterey, California Report on the Financial Statements We have audited the accompanying financial statements of Dela Vina Housing, Inc., (a California nonprofit corporation) HUD Project No. 121-HD038-NP-CMI, which comprise the statement of financial position as of June 30, 2017, and the related statement of activities, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 2

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dela Vina Housing, Inc. as of June 30, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental information shown on pages 14 to 21 as required by the Uniform Financial Reporting Standards issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2017 on our consideration of Dela Vina Housing, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Dela Vina Housing, Inc. s internal control over financial reporting and compliance. September 29, 2017 Hayashi Wayland, LLP 3

5 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI STATEMENT OF FINANCIAL POSITION JUNE 30, 2017 ASSETS CURRENT ASSETS: 1120 Cash $ 26, Tenant accounts receivable Prepaid expenses 5,523 Total current assets 32,639 RESTRICTED DEPOSITS: 1191 Tenant security deposits 3, Replacement reserve 143, Other reserves 34, Residual receipts reserve 22,667 Total restricted deposits 204,303 FIXED ASSETS: 1410 Land 209, Buildings and building improvements 1,178, Furniture and equipment 50,286 Total fixed assets 1,438, Accumulated depreciation (782,783) Fixed assets net 655,485 TOTAL ASSETS $ 892,427 4

6 LIABILITIES AND NET ASSETS CURRENT LIABILITIES: Accounts payable Prepaid revenue $ 30, Total current liabilities 31, TENANT SECURITY DEPOSITS 3,678 LONG TERM LIABILITIES: 2131 Accrued interest payable 77, Note payable surplus cash 120, Mortgage payable 1,152,200 Total long-term liabilities 1,349, NET ASSETS (DEFICIT) Unrestricted (492,150) TOTAL LIABILITIES AND NET ASSETS $ 892,427 See Notes to Financial Statements. 5

7 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 REVENUE: RENTAL REVENUE: 5120 Rent revenue $ 43, Tenant assistance payments 119, Rent revenue furniture rent 2,219 Total potential rental revenue 165, Apartment vacancy (1,039) Net rental revenue 164,812 FINANCIAL REVENUE: 5430 Revenue from investments residual receipts reserve Revenue from investments replacement reserve Revenue from investments furniture reserve 16 Total financial revenue 828 OTHER REVENUE: Laundry revenue Tenant charges 1, EXPENSES: Total other revenue 1,791 Total revenue 167,431 ADMINISTRATIVE EXPENSE: 6203 Conventions Advertising Office salaries 22, Office expenses 8, Office rent 3, Manager salaries 9, Legal fees Audit expense 8, Bookkeeping fees Miscellaneous administrative expenses 220 Total administrative expense $ 52,393 6

8 UTILITIES: 6450 Electricity $ 2, Water 4, Gas Sewer 4,052 Total utilities expense 11,988 OPERATING AND MAINTENANCE: 6510 Payroll 33, Supplies 7, Contracts 9, Garbage 2,692 Total operating and maintenance expense 52,928 TAXES AND INSURANCE: 6710 Real estate taxes Payroll taxes 5, Property and liability insurance 7, Worker s compensation insurance 1, Health insurance and other employee benefits 11, Miscellaneous taxes, licenses, permits and insurance 316 Total taxes and insurance expense 26,904 FINANCIAL EXPENSE: Interest on note payable Miscellaneous financial expenses 3, Total financial expense 3,612 Total cost of operations before depreciation 147,825 Change in net assets before depreciation 19, Depreciation expense 42, Change in net assets (23,318) NET ASSETS (DEFICIT), BEGINNING OF YEAR (468,832) NET ASSETS (DEFICIT), END OF YEAR $ (492,150) See Notes to Financial Statements. 7

9 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Rental revenue $ 164,591 Interest revenue 828 Other operating revenue 1,791 Administrative expense (52,393) Utilities expense (11,988) Operating and maintenance expense (51,298) Real estate taxes (681) Property and liability insurance (7,111) Miscellaneous taxes, licenses, permits and insurance (19,025) NET CASH PROVIDED BY OPERATING ACTIVITIES 24,714 CASH FLOWS FROM INVESTING ACTIVITIES: Deposits to: Replacement reserve account (12,381) Residual receipts reserve account (11) Other reserves account (2,218) Withdrawals from Replacement reserve account 4,171 Purchases of fixed assets (3,062) NET CASH USED IN INVESTING ACTIVITIES (13,501) NET INCREASE IN CASH 11,213 CASH, BEGINNING OF YEAR 15,128 CASH, END OF YEAR $ 26,341 8

10 RECONCILIATION OF CHANGES IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Change in net assets $ (23,318) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 42,924 (Increase) decrease in: Tenant accounts receivable (769) Prepaid expenses 97 Tenant security deposits 461 Increase (decrease) in: Accounts payable 1,630 Prepaid revenue 548 Tenant security deposits (461) Accrued interest payable 3,602 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 24,714 See Notes to Financial Statements. 9

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12 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Dela Vina Housing, Inc. (the Organization ) was organized as a California nonprofit corporation, formed in 1996 to acquire property located in Monterey, California, and to construct and operate thereon an apartment complex of 14 units (known as Dela Vina Apartments), under Section 811 of the National Affordable Housing Act. Such projects are regulated by the United States Department of Housing and Urban Development (HUD) with respect to rent charges and operating methods. Dela Vina Housing, Inc. is a consolidated affiliate of Interim, Inc. The following significant accounting policies have been followed in the preparation of the financial statements: Basis of Accounting Dela Vina Housing, Inc. maintains its records and prepares its financial statements using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Revenue Recognition Rental revenue is shown at its maximum gross potential. Vacancy loss is shown as a reduction in rental revenue. Receivables Management has elected to record bad debts using the direct writeoff method. Accounting principles generally accepted in the United States of America require that the allowance method be used to reflect bad debts. However, the effect of the use of the direct write-off method is not materially different from the result that would have been obtained had the allowance method been followed. Cash Equivalents The Organization considers all short-term investments with an original maturity of three months or less to be cash equivalents. Funded Reserves In accordance with the Regulatory Agreement for nonprofit mortgagors under Section 811 of the National Affordable Housing Act, Dela Vina Housing, Inc. maintains a replacement reserve, a residual receipts reserve and furniture reserve from which funds cannot be disbursed without HUD approval. Fixed Assets Fixed assets are recorded at cost. Depreciation is computed on the straight-line method based upon estimated useful lives as follows: Buildings and building improvements Furniture and equipment 7 30 Years 7 Years Maintenance and minor repairs are charged against income, major renewals and betterments are capitalized and depreciated. It is the Organization s policy to capitalize all property and equipment purchases greater than $1,000 with an estimated useful life of greater than one year. 10

13 NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advertising Costs It is the policy of the Organization to expense advertising costs as they are incurred. Estimates The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Distributions The Organization s regulatory agreement with HUD stipulates, among other requirements, that the Organization will not make distributions of assets or income to any of its officers or directors. Income Taxes As a tax-exempt not-for-profit organization, the Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and from state franchise tax under California Revenue and Taxation Code Section 23701(d), but is subject to taxes on unrelated business income when earned. Management has considered its tax positions and believes that all of the positions taken in its federal and state tax returns are more likely than not to be sustained upon examination. The Organization s returns are subject to examination by federal and state taxing authorities, generally for three years and four years, respectively, after they are filed. Fair Value Measurements The Organization s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. The fair value of the Organization s debt approximates book value as of June 30, Subsequent Events Subsequent events have been evaluated through September 29, 2017, which is the date the financial statements were available to be issued. NOTE 2. CONCENTRATION OF CREDIT RISK The Organization maintains its cash in bank deposit accounts with various financial institutions. At June 30, 2017, the Organization s deposits were fully insured. NOTE 3. OTHER RESERVES Other reserves at June 30, 2017 consist of the following: Furniture reserves $ 34,124 Total $ 34,124 11

14 NOTE 4. NOTE PAYABLE SURPLUS CASH Note payable to City of Monterey in the amount of $120,050 is secured by a deed of trust on the property at 345 Dela Vina, Monterey, California. Interest accrues at 3% annually and both principal and interest are due on January 30, If surplus cash is available at year end, meaning the excess of operating revenues over operating expenses, payment of the surplus cash is due 90 days after year end. If no surplus cash is available then no payment is due. NOTE 5. MORTGAGE PAYABLE Long-term debt includes a capital advance from HUD in the amount of $1,152,200. The construction has been financed by a capital advance from the U.S. Department of Housing and Urban Development. The maximum advance authorized is $1,152,200. At June 30, 2017, $1,152,200 had been drawn on the advance. The mortgage note shall bear no interest and shall not be repayable if the above-described project remains available for very low-income eligible individuals/families as approved by HUD for no less than 40 years. In no event may the capital advance be repaid without the permission of HUD. In connection with the financing and Project Rental Assistance Contract, the operations of the project will be subject to regulatory agreements that pertain to operations including the amount of rent that may be charged. If the Project is not operated in accordance with these agreements, the Capital Advance will become a note payable at an interest rate of 7.25%. At June 30, 2017, Dela Vina Housing, Inc. was in compliance with these agreements. NOTE 6. RELATED PARTY TRANSACTIONS All board members of Dela Vina Housing, Inc. are board members of Mariposa Housing, Inc., Lupine Housing, Inc., Catalyst Housing, Inc., Sunflower Housing, LLC and Rockrose Housing Corporation. They are also members of the housing committee of Interim, Inc. Interim, Inc. provides management and accounting services to Dela Vina Housing, Inc. and receives reimbursements for the costs incurred in carrying out these functions. Transactions with Interim, Inc. for the year ended June 30, 2017 are as follows: Salary reimbursements to Interim $ 64,748 Payroll tax reimbursements to Interim 5,635 Employee benefits and other reimbursements to Interim 13,064 Operating cost reimbursements to Interim 23,665 Total related party transactions $ 107,112 As of June 30, 2017, $29,684 of reimbursable costs is included in accounts payable. 12

15 NOTE 7. CONTINGENCIES AND COMMITMENTS The Organization receives significant financial assistance from loans and grants. Entitlement to these resources is generally contingent upon compliance with the terms and conditions of the loan or grant agreements and applicable federal regulations, including the expenditure of the resources for eligible purposes. Substantially all federal loans and grants are subject to a financial and compliance audit under federal regulations. Disallowed costs as a result of compliance audits become a liability of the Organization. Management believes that the potential for material liability due to future audit disallowance is remote. 13

16 SUPPLEMENTAL INFORMATION

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18 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI SUPPORTING DATA REQUIRED BY HUD FOR THE YEAR ENDED JUNE 30, 2017 RESERVE FOR REPLACEMENT AND RESIDUAL RECEIPTS ACCOUNTS: In accordance with the provisions of the Regulatory Agreement, restricted cash is held to be used for replacement of property and various other uses with the approval of HUD as follows: Residual Replacement Receipts Reserve Reserve Balance June 30, 2016 $ 135,624 $ 22,656 Monthly deposits (12 x $965) 11,580 Withdrawals (4,171) Interest Balance June 30, 2017 $ 143,834 $ 22,667 The replacement reserve and residual receipts reserve are held in separate bank accounts at Union Bank and Rabobank in Monterey, California. COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS AT THE BALANCE SHEET DATE: Add cash: Cash on hand and in banks Tenant security deposits $ 26,341 3,678 Total cash 30,019 Less current obligations: Accounts payable 30,665 Prepaid revenue 803 Tenant security deposits 3,678 Total current obligations 35,146 Surplus (deficit) cash at June 30, 2017 $ (5,127) 14

19 DELA VINA HOUSING, INC. HUD PROJECT NO. 121 HD038 NP CMI SUPPORTING DATA REQUIRED BY HUD FOR THE YEAR ENDED JUNE 30, 2017 (Continued) CHANGES IN FIXED ASSETS: ASSETS ACCUMULATED DEPRECIATION Current Net Book Balance Additions Balance Balance Provisions Balance Value July 1, 2016 (Deletions) June 30, 2017 July 1, 2016 (Deletions) June 30, 2017 June 30, 2017 Land $ 209,266 $ $ 209,266 $ $ $ $ 209,266 Buildings and improvements 1,175,654 3,062 1,178, ,133 41, , ,264 Furniture for tenant use 50,286 50,286 41,726 1,605 43,331 6,955 TOTAL $1,435,206 $ 3,062 $ 1,438,268 $ 739,859 $ 42,924 $ 782,783 $ 655,485 15

20 Owner: DELA VINA HOUSING, INC. TIN: Reporting From: 07/01/2016 Reporting To: 06/30/2017 FHA/Contract Number(s): 121HD Submission Type: AUD-OMB Assets 1120 Cash - Operations $ 26, Tenant/Member Accounts Receivable (Coops) $ N Net Tenant Accounts Receivable $ 775 Details - Other Reserves Description Furniture Reserves Other Reserves Detail $ 34, Prepaid Expenses $ 5, T Total Current Assets $ 32, Tenant/Patient Deposits Held in Trust $ 3, Replacement Reserve $ 143, Other Reserves $ 34, Residual Receipts Reserve $ 22, T Total Deposits $ 200, Land $ 209, Buildings $ 1,178, Furniture for Project/Tenant Use $ 50, T Total Fixed Assets $ 1,438, Accumulated Depreciation $ 782, N Net Fixed Assets $ 655, T Total Assets $ 892,427 Liabilities 2110 Accounts Payable - Operations $ 30, Prepaid Revenue $ T Total Current Liabilities $ 31, Tenant/Patient Deposits Held In Trust (Contra) $ 3, Notes Payable - Surplus Cash $ 120, Mortgage (or Bonds) Payable - First Mortgage (or Bonds) $ 1,152, Accrued Interest Notes Payable (Surplus Cash) Long Term $ 77,181 Liabilities 2300T Total Long Term Liabilities $ 1,349, T Total Liabilities $ 1,384,577 Net Assets 3131 Unrestricted Net Assets $- 492, Total Net Assets $- 492, T Total Liabilities and Equity/Net Assets $ 892,427 Rent Revenue 5120 Rent Revenue - Gross Potential $ 43, Tenant Assistance Payments $ 119, Rent Revenue - Stores and Commercial $ 2, T Total Rent Revenue $ 165,851 Vacancies 5220 Apartments $ 1, T Total Vacancies $ 1, N Net Rental Revenue (Rent Revenue Less Vacancies) $ 164,812 Financial Revenue 5430 Revenue from Investments - Residual Receipts $ Revenue from Investments - Replacement Reserve $ Revenue from Investments - Miscellaneous $ T Total Financial Revenue $ 828 Other Revenue 5910 Laundry and Vending Revenue $ 1, Tenant Charges $ T Total Other Revenue $ 1, T Total Revenue $ 167,431 Administrative Expenses 6203 Conventions and Meetings $ Advertising and Marketing $ Office Salaries $ 22, Office Expenses $ 8, Office or Model Apartment Rent $ 3, Manager or Superintendent Salaries $ 9, Legal Expense - Project $ Audit Expense $ 8, Bookkeeping Fees/Accounting Services $ Miscellaneous Administrative Expenses $ T Total Administrative Expenses $ 52,393 Utilities Expenses 6450 Electricity $ 2, Water $ 4,725

21 6452 Gas $ Sewer $ 4, T Total Utilities Expense $ 11,988 Operating & Maintenance Expenses 6510 Payroll $ 33, Supplies $ 7, Contracts $ 9, Garbage and Trash Removal $ 2, T Total Operating and Maintenance Expenses $ 52,928 Taxes & Insurance 6710 Real Estate Taxes $ Payroll Taxes (Project's Share) $ 5, Property & Liability Insurance (Hazard) $ 7, Workmen's Compensation $ 1, Health Insurance and Other Employee Benefits $ 11, Miscellaneous Taxes, Licenses, Permits and Insurance $ T Total Taxes and Insurance $ 26,904 Financial Expenses 6830 Interest on Notes Payable (Long Term) $ 3, Miscellaneous Financial Expenses $ T Total Financial Expenses $ 3,612 Operating Results 6000T Total Cost of Operations before Depreciation $ 147, T Profit (Loss) before Depreciation $ 19, Depreciation Expenses $ 42, N Operating Profit or (Loss) $- 23,318 Change in Net Assets from Operations 3247 Change in Unrestricted Net Assets from Operations $- 23, Change in Total Net Assets from Operations $- 23,318 Part II S The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit period even if deposits have been temporarily waived or suspended. 17 $ 11,580 Equity Data S Previous Year Unrestricted Net Assets $- 468, Change in Unrestricted Net Assets from Operations $- 23, Unrestricted Net Assets $- 492,150 S Previous Year Total Net Assets $- 468, Change in Total Net Assets from Operations $- 23, Total Net Assets $- 492,150 Cash Flow from Operating Activities S Rental Receipts $ 164,591 S Interest Receipts $ 828 S Other Operating Receipts $ 1,791 S Total Receipts $ 167,210 S Administrative $- 52,393 S Utilities $- 11,988 S Operating and Maintenance $- 51,298 S Real Estate Taxes $- 681 S Property Insurance $- 7,111 S Miscellaneous Taxes and Insurance $- 19,025 S Tenant Security Deposits $ 0 S Total Disbursements $- 142,496 S Net Cash provided by (used in) Operating Activities $ 24,714 Cash Flow from Investing Activities S Net Deposits to the Reserve for Replacement account $- 8,210 S Net Deposits to Other Reserves $- 2,218 S Net Deposits to the Residual Receipts account $- 11 S Net Purchase of Fixed Assets $- 3,062 S Net Cash used in Investing Activities $- 13,501 Cash Flow from Financing Activities S Net increase (decrease) in Cash and Cash Equivalents $ 11,213 Cash and Cash Equivalents S Beginning of Period Cash $ 15,128 S1200T End of Period Cash $ 26,341 Reconciliation of Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 3250 Change in Total Net Assets from Operations $- 23,318 Adjustments to Reconcile Net Profit (Loss) to Net Cash Provided by (Used in) Operating Activities 6600 Depreciation Expenses $ 42,924 S Decrease (increase) in Tenant/Member Accounts Receivable $- 769 S Decrease (increase) in Prepaid Expenses $ 97 S Decrease (increase) in Cash Restricted for Tenant Security Deposits $ 461

22 S Increase (decrease) in Accounts Payable $ 1,630 S Increase (decrease) in Accrued Interest Payable $ 3,602 S Increase (decrease) in Tenant Security Deposits held in trust $- 461 S Increase (decrease) in Prepaid Revenue $ 548 Net Cash provided by (used in) Operating Activities S Net Cash provided by (used in) Operating Activities $ 24,714 Notes S Organization and Presentation Note Dela Vina Housing, Inc. (the 'Organization') was organized as a California nonprofit corporation, formed in 1996 to acquire property located in Monterey, California, and to construct and operate thereon an apartment complex of 14 units (known as Dela Vina Apartments), under Section 811 of the National Affordable Housing Act. Such projects are regulated by the United States Department of Housing and Urban Development (HUD) with respect to rent charges and operating methods. Dela Vina Housing, Inc. is a consolidated affiliate of Interim, Inc. S Summary of Significant Accounting Policies Note The following significant accounting policies have been followed in the preparation of the financial statements: Basis of Accounting: Dela Vina Housing, Inc. maintains its records and prepares its financial statements using the accrual method of accounting. Revenue Recognition: Rental revenue is shown at its maximum gross potential. Vacancy loss is shown as a reduction in rental revenue. Receivables: Management has elected to record bad debts using the direct write-off method. Accounting principles generally accepted in the United States of America require that the allowance method be used to reflect bad debts. However, the effect of the use of the direct write-off method is not materially different from the result that would have been obtained had the allowance method been followed. Cash Equivalents: The Organization considers all short-term investments with an original maturity of three months or less to be cash equivalents. Funded Reserves: In accordance with the Regulatory Agreement for nonprofit mortgagors under Section 811 of the National Affordable Housing Act, Dela Vina Housing, Inc. maintains a replacement reserve, a residual receipts reserve and furniture reserve from which funds cannot be disbursed without HUD approval. Fixed Assets: Fixed assets are recorded at cost. Depreciation is computed on the straight-line method based upon estimated useful lives as follows: Buildings and building improvements 7-30 Years Furniture and equipment 7 Years Maintenance and minor repairs are charged against income, major renewals and betterments are capitalized and depreciated. It is the Organization's policy to capitalize all property and equipment purchases greater than $1,000 with an estimated useful life of greater than one year. Advertising Costs: It is the policy of the Organization to expense advertising costs as they are incurred. Estimates: The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Distributions: The Organization's regulatory agreement with HUD stipulates, among other requirements, that the Organization will not make distributions of assets or income to any of its officers or directors. Income Taxes: As a tax-exempt not-for-profit organization, the Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and from state franchise tax under California Revenue and Taxation Code Section 23701(d), but is subject to taxes on unrelated business income when earned. Management has considered its tax positions and believes that all of the positions taken in its federal and state tax returns are more likely than not to be sustained upon examination. The Organization's returns are subject to examination by federal and state taxing authorities, generally for three years and four years, respectively, after they are filed. Fair Value Measurements: The Organization's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. The fair value of the Organization's debt approximates book value as of June 30, Subsequent Events: Subsequent events have been evaluated through September 29, 2017, which is the date the financial statements were available to be issued. S Mortgages (or Bond) Payable Note Long-term debt includes a capital advance from HUD in the amount of $1,152,200. The construction has been financed by a capital advance from the U.S. Department of Housing and Urban Development. The maximum advance authorized is $1,152,200. At June 30, 2017, $1,152,200 had been drawn on the advance. The mortgage note shall bear no interest and shall not be repayable if the abovedescribed project remains available for very low-income eligible individuals/families as approved by HUD for no less than 40 years. In no event may the capital advance be repaid without the permission of HUD. In connection with the financing and Project Rental Assistance Contract, the operations of the project will be subject to regulatory agreements that pertain to operations including the amount of rent that may be charged. If the Project is not operated in accordance with these agreements, the Capital Advance will become a note payable at an interest rate of 7.25%. At June 30, 2017, Dela Vina Housing, Inc. was in compliance with these agreements. S Notes/Loans Payable Note Note payable to City of Monterey in the amount of $120,050 is secured by a deed of trust on the property at 345 Dela Vina, Monterey, California. Interest accrues at 3% annually and both principal and interest are due on January 30, If surplus cash is available at year end, meaning the excess of operating revenues over operating expenses, payment of the surplus cash is due 90 days after year end. If no surplus cash is available, then no payment is due. Details - Notes/Loans Payable S Creditor City of Monterey S Amount Due $ 120,050 S Does the Note/Loan Payable place a lien on project Yes assets? S Total of Notes/Loans Payable $ 120,050 S Related Party Transactions Note All board members of Dela Vina Housing, Inc. are board members of Mariposa 18

23 Housing, Inc., Lupine Housing, Inc., Catalyst Housing, Inc., Sunflower Housing, LLC and Rockrose Housing Corporation. They are also members of the housing committee of Interim, Inc. Interim, Inc. provides management and accounting services to Dela Vina Housing, Inc. and receives reimbursements for the costs incurred in carrying out these functions. Transactions with Interim, Inc. for the year ended June 30, 2017 are as follows: reimbursements to Interim $64,748, Payroll tax reimbursements to Interim $5,635, Employee benefits and other reimbursements to Interim $13,064, Operating cost reimbursements to Interim $23,665, Total related party transactions $107,112. As of June 30, 2017 $29,684 of reimbursable costs is included in accounts payable. Details - Related Party Transactions S Company Name Interim, Inc. S Amount Received $ 107,112 S Additional Note The Organization receives significant financial assistance from loans and grants. Entitlement to these resources is generally contingent upon compliance with the terms and conditions of the loan or grant agreements and applicable federal regulations, including the expenditure of the resources for eligible purposes. Substantially all federal loans and grants are subject to a financial and compliance audit under federal regulations. Disallowed costs as a result of compliance audits become a liability of the Organization. Management believes that the potential for material liability due to future audit disallowance is remote. S Additional Note Other reserves at June 30, 2017 consist of the following: Furniture reserves $34,124 S Additional Note The Organization maintains its cash in bank deposit accounts with various financial institutions. At June 30, 2017, the Organization's deposits were fully insured. Report on the Financial Statement and on the Supplementary Schedule of Federal Awards S Opinion Unmodified S Going Concern" Issue No Report on Supplemental Data S Opinion Unmodified Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards S Instances of Fraud, Non-compliance, or Abuse of Laws, Regulations, Contracts or Grants That Have A Material Effect on the Financial Statements S Significant Deficiencies or Material Weaknesses in Internal No Controls Over Financial Reporting Indicator Report on Compliance and Internal Control over Compliance Applicable to Each Major Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by Uniform Guidance S Opinion on Compliance with Laws, Regulations, and Contracts 19 No Unmodified Applicable to Each Major Program S Significant Deficiencies or Material Weaknesses in Internal No Controls Over Compliance Indicator Schedule of Findings and Questioned Costs S Indicator - Any audit findings disclosed that are required to be reported in accordance with section of OMB Uniform No Guidance S Dollar threshold used to distinguish between type A and type B programs $ 750,000 S Low-Risk Auditee Indicator Yes Schedule of Reserve for Replacement 1320P Balance at Beginning of Year $ 135, DT Total Monthly Deposits $ 11, INT Interest on Replacement Reserve Accounts $ WT Approved Withdrawals $ 4, Balance at End of Year, Confirmed by Mortgagee $ 143, R Deposits Suspended or Waived Indicator No Schedule of Residual Receipts 1340P Balance at Beginning of Year $ 22, INT Interest on Residual Receipt Accounts $ Balance at Current Fiscal Year End $ 22,667 Computation of Surplus Cash, Distributions, and Residual Receipts (Annual) S Cash $ 30,019 S Total Cash $ 30,019 S Accounts Payable - 30 days $ 30, Prepaid Revenue $ Tenant/Patient Deposits Held In Trust (Contra) $ 3,678 S Total Current Obligations $ 35,146 S Surplus Cash (Deficiency) $- 5,127 S Deposit Due Residual Receipts $ 0 Schedule of Changes in Fixed Asset Accounts 1410P Beginning Balance for 1410 $ 209, Land $ 209, P Beginning Balance for 1420 $ 1,175, AT Additions for 1420 $ 3,062 Details - Additions for A Item Purchased Vinyl and Rubber Base Installation 1420A Total Amount $ 1,512

24 1420A Item Purchased Water Heater Replacement 1420A Total Amount $ 1, Buildings $ 1,178, P Beginning Balance for 1450 $ 50, Furniture for Project/Tenant Use $ 50, PT Total Beginning Balance for Fixed Assets $ 1,435, AT Total Asset Additions $ 3, T Total Fixed Assets $ 1,438, P Beginning Balance for 1495 $ 739, Total Provisions $ 42, Ending Balance for Accumulated Depreciation $ 782, N Total Net Book Value $ 655,485 Details - Schedule of Expenditures of Federal Awards S Program Number S Name of Federal Agency U.S. Department of Housing and Urban Development S Name of Federal Program Supportive Housing for Persons with Disabilities S CFDA Number S Federal Awards Expended $ 1,271,901 S Opinion Unmodified Schedule of Expenditures of Federal Awards S Total Federal Awards Expended $ 1,271,901 S Note to the Schedule Note 1. Basis of Presentation. The accompanying schedule of expenditures of federal awards (the 'Schedule') includes the federal award activity of Dela Vina Housing, Inc. under programs of the federal government for the year ended June 30, The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Dela Vina Housing, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Dela Vina Housing, Inc. Note 2. Summary of Significant Accounting Policies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-Profit Organizations, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Dela Vina Housing, Inc. has elected not to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. Note 3. Loan Outstanding. Dela Vina Housing, Inc. had the following loan balance outstanding at June 30, This loan program is also included in the federal expenditures presented in the Schedule of Expenditures of Federal Awards. FEDERAL GRANTOR/ PASS THROUGH GRANTOR PROGRAM OR CLUSTER TITLE. Supportive Housing for Persons with Disabilities. CFDA NUMBER AMOUNT $1,152,200 Mortgagor's Certification S Narrative I/we hereby certify that I/we have examined the accompanying financial statements AND supplemental data and, to the best of my/our knowledge and belief, the same is complete AND accurate. S Name of Signatory #1 Barbara Mitchell S Title of Certifying Official #1 Executive Director S Name of Signatory #2 Pali Weerasekera Mortgagors Certification S Title of Certifying Official #2 Director of Finance Mortgagor's Certification S Auditee Telephone Number S Date of Certification 09/29/2017 S Auditee Name Dela Vina Housing, Inc. S Auditee Street Address Line Dela Vina Avenue S Auditee City Monterey S Auditee State California S Auditee Zip Code S Auditee Contact Name Pali Weerasekera S Auditee Contact Title Director of Finance S Auditee Contact FAX Number S Auditee Contact pweerasekera@interiminc.org Managing Agent's Certification S Narrative I/we hereby certify that I/we have examined the accompanying financial statements AND supplemental data and, to the best of my/our knowledge and belief, the same is complete AND accurate. S Name of Managing Agent Interim, Inc. S Name of Signatory Barbara Mitchell S Managing Agent TIN S Name of Property Manager Barbara Mitchell Auditor's Transmittal Letter S Audit Firm ID (UII) S Audit Firm Hayashi & Wayland Accounting & Consulting, LLP S Lead Auditor First Name Autumn 20

25 S Lead Auditor Last Name Rossi S Auditor Contact Title Partner S Auditor Street Address Line Padre Drive, Suite 101 S Auditor City Salinas S Auditor State CA S Auditor Zip Code S Telephone Number S Audit Firm TIN S Date of Independent Auditor's Report 09/29/2017 S Auditor Contact FAX Number S Auditor Contact autumnr@hw-cpa.com - end of statement - 21

26 REPORT REQUIRED BY GOVERNMENT AUDITING STANDARDS

27 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITORS REPORT Board of Directors Dela Vina Housing, Inc. Monterey, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Dela Vina Housing, Inc., which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 29, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Dela Vina Housing, Inc. s, internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Dela Vina Housing, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of Dela Vina Housing, Inc. s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Dela Vina Housing, Inc. s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with 22

28 which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. September 29, 2017 Hayashi Wayland, LLP 23

29 REPORTS REQUIRED BY THE UNIFORM GUIDANCE

30 Board of Directors Dela Vina Housing, Inc. Monterey, California REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE INDEPENDENT AUDITORS REPORT Report on Compliance for Each Major Federal Program We have audited Dela Vina Housing, Inc. s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Dela Vina Housing, Inc. s major federal programs for the year ended June 30, Dela Vina Housing, Inc. s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Dela Vina Housing, Inc. s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Dela Vina Housing, Inc. s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Dela Vina Housing, Inc. s compliance. Opinion on Each Major Federal Program In our opinion, Dela Vina Housing, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,

31 Report on Internal Control Over Compliance Management of Dela Vina Housing, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Dela Vina Housing, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Dela Vina Housing, Inc. s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. September 29, 2017 Hayashi Wayland, LLP 25